(Australian Associated Press)
Building approvals fell by a less than expected 1.7 per cent in July, and economists are confident housing construction is on track for a gradual easing.
Weakness in approvals for apartments dragged down overall activity in July, though the decline was less than the five per cent fall economists had been expecting.
CBA economist John Peters said the numbers indicate more resilience than markets had anticipated.
“Today’s residential approvals outcome is consistent with our medium-term view that that the widely anticipated decline in residential construction over the next two years will be gradual and protracted rather than something sharp and painful,” he said.
Approvals for private sector houses remained nearly steady at 9,743 in July, continuing the stabilisation seen in recent months.
However, the ‘other dwellings’ category, which includes apartment blocks and townhouses, slipped 6.7 per cent to 8,080, the Australian Bureau of Statistics said.
An increase in total dwelling approvals in June was revised to 11.7 per cent, but over the 12 months to July approvals are down 13.9 per cent.
The data reinforces figures released by the Housing Industry Association on Tuesday, which showed overall new home sales fell by 3.7 per cent in July, led by significantly fewer new apartments being sold.
The renewed weakness comes amid tighter lending conditions and the Reserve Bank of Australia’s warnings about the rising levels of housing debt.
The Australian Prudential Regulation Authority capped interest-only mortgage lending on March 31, telling lenders to limit higher risk interest-only loans to 30 per cent of new residential mortgages.
That set off a fresh round of rate increases by the major lenders, with banks repricing their loan books to make interest-only and investor loans more expensive.
The Australian dollar jumped after the release of the approvals data, and figures showing a sharper than expected increase in construction work done in the June quarter.
The local currency was trading at 79.89 US cents at 1545 AEST, up from 79.67 US cents ahead of the release of data at 1130 AEST.